I can’t believe I haven’t written about this in 2 years of blogging, but I cringe every time I see a personal finance blogger recommend one of those Will preparation services/sites. Every single week, I review at least 3 (and sometimes up to 10) Wills written by trained and licensed attorneys.
While I find mistakes, oversights and ignored natural testamentary intent changes at least there was a trained individual trying to flush out issues and follow all the procedural landmines that could be out there when executing a legal document. So I got excited when I saw the headline “The Case Against Do-It-Yourself Wills”written by Deborah L. Jacobs on Forbes.com. Some choice quotes from the article include,
More recently, a wealthy Texan who tried to save a few bucks wound up forfeiting his $3.5 million federal estate tax exemption.(Texas has no estate tax). Using a form he copied from a library book, this guy cobbled together a will, leaving everything–a cool $7 million–to his wife. There was no estate tax due at that point because assets left to a citizen spouse (or to charity) generally aren’t subject to the tax. But anything left when she died, less her own exemption amount, could be taxable as part of her estate.
To fix the problem after the husband died, William Wollard, a lawyer with his own practice in McKinney, Texas, recommended the wife disclaim (or turn down) the entire $3.5 million exemption amount, allowing it to pass under state law, estate-tax free to the couple’s three adult sons. The assets she chose to disclaim were most of the ranch land the couple owned, and a large sum of cash.
Another important detail you might overlook in your do-it-yourself effort: Various types of assets do not usually pass through a will or living trust. These include savings bonds, and certain bank accounts or certificates of deposit, which can be made automatically payable on death to the person you name. Retirement accounts are distributed according to beneficiary designation forms that you complete when you open an account and can later amend. Similarly, when you apply for life insurance, you are asked to choose a beneficiary, and the proceeds are paid out according to those instructions. In addition to preparing your will, a lawyer can coordinate all these moving parts.
By not getting legal advice to help navigate changing circumstances, one Washington state resident of modest means just deepened the mess he left his family. Using an online program, this fellow did his original will in 2003, leaving everything to his adult son and daughter in equal shares. Six years later, Son told Dad that he and his company were filing for bankruptcy and that he was getting a divorce. He asked Dad to see a lawyer about putting his share of the estate into a trust that would protect these assets from creditors, rather than leaving it to him outright.
Dad thought he knew better and didn’t want to shell out the dough for a trust. Instead, he changed his will himself online, leaving everything to his daughter, with the expectation that she would “do the right thing” and give part of her inheritance to her brother, says Wendy S. Goffe, a lawyer with Graham & Dunn in Seattle. When the daughter refused to split her share after Dad died, the brother consulted Goffe, who told him nothing could be done at this point.
I have discussed some of the issues Ms. Jacobs discusses including intestacy, special needs planning and state estate taxes, but I think it is more basic than those issues. Does it seem reasonable for someone to recommend that you draft your own deed? or commercial contract? or prenup? Yet, somehow, this area of the law gets pushed aside and automated. To save some money, but at what possible cost?
There is no substitute for sitting down with an attorney to talk you through the issues that can come up. Oh and nothing I said here or ever on my blog can be construed as legal advice as we have no legal relationship.